The Franchise Dream: When to Go For it, When to Stay Small

Some entrepreneurs go into business with a single-minded goal: franchising.  To them, it seems like the ultimate business dream – and indeed, it can be.  Growing your small business into a chain that will get your name out there and effectively start an empire is a goal shared by many.  But franchising isn’t right for every business, and sometimes it’s best to wait before going for franchisor status.

To determine whether franchising is right for you now or in the future, ask yourself these questions:

Should I franchise? Many business owners don’t stop to ask themselves this. But, the truth is, franchising isn’t always the logical next step. Whether or not you ultimately pursue franchising depends mostly upon your personal goals.  Where do you see yourself 5 years from now? What do you want your life to be like? How much control of your business are you willing to give up to others? Be prepared for the fact that starting a franchise is, in effect, starting a whole new business. You’ll suddenly be in the business of selling and servicing franchises, and that may not be what you got into this field for in the first place. And, finally, can your business goals be achieved through some other means? Franchising can be a risky move, and if you think you’d be just as happy making your unique business the best it can be, that may be the most advantageous route.

Am I ready? Does your business stand out from your competitors? Do you have a really strong customer base that indicates that more locations will meet a real need?  Are you confident that the average franchisee will not only be able to take your business model and make a return on their investment, but be successful as well?

What does the market look like? Never underestimate the importance of doing your research.  Will your area be seeing a growing demand for your product or service? Future trends are the key to a franchise’s success. You wouldn’t want to pour money into franchising only to find that people are no longer interested in what you’re selling.

Do I have the resources? You should take this question very, very seriously, because although franchising is known as a low-cost way of expanding a business, that doesn’t mean it’s free. You can expect $20,000 - $50,000 in legal costs, $20,000 - $100,000 in development costs, personnel costs and a budget for marketing each franchise, which can run $5,000 - $7,000 each.  Starting small can help make this process easier, but you’ll still need a lot of money up front.  You’re going to burn through money very quickly, and you’ve got to be okay with that.

Is my motivation strong enough? One of the most important qualities that a franchisor must have is the passionate drive toward achieving a single goal.  If you’re a waffler, perhaps you nix this idea. Changing your mind a lot will only make the process far more expensive and difficult to meet with success. You must be prepared for the fact that this will take up a lot of your time, and while overseeing the start of the new franchises you’ll still have to put 100% into your existing business to keep it strong.  The desire and dedication to see it through properly is the one thing that will help you make the dream real.

Am I setting myself up for failure? Some entrepreneurs are so focused on the dream of having a franchise that they allow the quality of their product or service to take a nosedive.  Take, for example, the case of the restauranteur who plans to build his business into a franchise from the very beginning.  He believes that in order to be successful, he needs to create a menu that’s cheap and easy to create, so it can be duplicated later on.  So, his restaurant serves food that’s entirely pre-packaged and the customers can tell it’s anything but fresh.  Skimping on quality takes away the potential to create something really special – something that deserves to be reproduced. Your business needs to be strong enough to stand on its own before it can support multiple locations.

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